Name: Inside ETFs: Can investors hit the jackpot off the gambling boom? | REUTERS
Uploaded: 2026-01-27T17:03:26.000Z
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This is inside ETFs, and we're talking about sports betting.

Since the supreme court unlocked the US gambling market in 2018, sports betting has exploded.

Americans wagered a staggering $150 billion last year.

But for investors, the real game is about betting on the businesses that take a cut of the action.

Yet with regulation and fierce competition in play, can your portfolio still cash in?

Let's ask D.F. maza, CEO of Rointhill Investments.

So, Dave, bank of America is warning that the growth of sports gambling could push consumers into defaults.

Is this sector more fragile than investors realize, especially with affordability already under pressure?

Look, I think there are certainly macroeconomic forces at play when it comes to the amount of discretionary income that users and consumers would be able to allocate toward the sports betting market.

But what we've seen actually, even through ups and downs in the economy, whether it's the COVID period, the acceleration on a Covid period, is that the actual sports betting market has expanded.

The US Market itself is sort of now already meaningfully sized.

National sports Betting revenue hit 13.71 billion in 2024, which is actually up 25% from 2023.

And multiple states alone crossed over $1 billion in annual revenue.

So I think there's longer term momentum in the sports betting space, regardless of sort of the economic forces at play.

Let's look at some of these gambling stocks.

They sold off last week amid fears that prediction market startups are stealing the share.

Are prediction markets a real threat to traditional sports books?

that's probably the biggest risk and in the biggest also opportunity for the sports betting market.

So, you know, we talked a bit about the macro a moment ago, but

the growth in prediction markets has been really parabolic in many ways.

And there's really pent up demand for users and betters to be able to sort of engage in real time activity.

But we're already seeing sportsbooks either partner with prediction markets or begin to integrate them into their offerings.

So I don't view this as necessarily an existential threat.

I actually think both areas can grow together.

But we are in a bit of a digestion period.

Digestion period, excuse me, where investors are trying to ascertain exactly what impacts prediction markets will have on traditional sports betting.

Meanwhile, legal operators reportedly captured 74% of U.S. online gambling revenue last year.

So are licensed companies fighting an uphill battle on profitability?

There's a ton of competition in the space, which is one of the reasons why we believe a diversified approach can actually make sense rather than just taking a single operator bet.

So it really is, this is really intended to capture sort of the full wave of operations because we're sports betting, we tend to think of just the household names, your Flutter, your draftkings, Etane, Churchill Downs.

But there's actually a lot of picks and shovel exposure that you might actually want in igaming for example.

Well, regulatory risk is always in focus as well for the sector, including a proposal in Arizona to raise gaming taxes as high as 45%.

So how much of a headwind is higher taxation for your etf?

I think the idea around taxation for the space has sort of has been growing.

We see additional states as they see the revenue and the interest in sports betting, they want to have a piece of the action.

And we have certainly seen when states have come out with sort of tax proposals, near term headwinds on some of the companies.

But I think with the growth in the space and also the diversified exposure that these companies are doing with actually building partnerships directly with leagues, whether it's the NFL, NBA, what have you, that actually is something that I think is going to help with potential for taxation.

It's set to open three major casinos, marking another milestone in US Casino expansion.

But does brick and mortar growth threaten the momentum of betting ups?

I think there's always going to be an opportunity for people who want in person experiences kind of traditional gambling.

But the sports betting market is just much broader.

It's something that people can really connect to.

And when we see sort of these large events happening, whether it's Finals, whether it's something like the super bowl, which is coming up in a couple of weeks, that's actually when we see sports betting take center stage away from traditional gambling.

So finally to flutter recently cut revenue guidance by around $390 million, citing unfavorable NFL parlay results.

So is there a risk that bettors are getting smarter and beating the apps?

Well that's, that's actually a really interesting point.

We have seen seen this example flutter through your point most recently, most notably.

But I do think again these companies employ a tremendous amount of resources to try to always ensure that they have the edge.

And again, one of the reasons why I think there's longer term momentum of interest in the space, maybe in some ways you could say it's it's a good thing that actually betters are getting smarter because then that can really up the game of the companies and operators involved in the space.

That was Dave Mazza from Roundhill Investments.

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